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Manufacturers benefit from examining customer loyalty |
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 by Thomas R. Cutler
Whether a sense of loyalty develops often depends on one particular dynamic: a customer’s relationship with the salesperson. A team of academic marketing professors, including one from the University of Missouri-Columbia, found that customer loyalty toward the salesperson -rather than the products and services tied closely to the seller-can inspire greater sales. This finding is often negative for the manufacturing business leaving the company more vulnerable.
According to Lisa K. Scheer, Ph.D. (and Distinguished Professor with
the University of Missouri-Columbia, College of Business), “Based on
our findings, we strongly recommend that businesses develop strategies
that encourage not only salesperson loyalty, but also enhance the
company’s products and value. Doing so results in loyalty to both the
company and salesperson; in the long run, it is good for sales and
revenues. Companies that believe they understand loyalty among their
customers may be fooling themselves. They may not really understand
precisely where that loyalty is directed. Is it to specific individuals
who service them and work with them, or is it with the company and its
products or brands?”
The study focused on business-to-business relationships between 362
industrial buyers and the manufacturers’ representative salespeople who
market products to buyers in a wide-range of industrial markets. Three
sources of data were analyzed: the buyer provided information about
his/her relationship with the selling company and salesperson; the
salesperson provided information about the same relationships with the
buyer; and sales managers shared objective information about buyers’
purchases. Scheer said, “Despite having multiple sources to purchase
from and numerous resources to compare prices, the bond between buyer
and salesperson greatly influenced the transaction.”
Scheer suggested that relationships play a big role-whether customers
are loyal to buying from one source or another. In the study,
three-fourths of the buyers had other sources they could go to for
exactly the same product; but they stayed loyal to a particular
company. Even in a business-to-business context, the personal
relationships are important. Companies need to understand the drivers
behind customer loyalty. Is it vested in elements the company really
controls and owns-like the brand, trademarks and products? Or, is it
vested more in things that are not under the company’s control? What
happens if a salesperson leaves to join a competitor?
Manufacturers must use more in-depth surveys to better understand
factors that result in loyalty. “Current approaches are often too
vague-only asking “how likely are you to buy these products again or
patronize us again? They don’t get into why’s,” according to Scheer.
Hosted solutions such as Salesforce.com address the difficulties
associated with deploying traditional client server based CRM (customer
relationship management) solutions, but utilization rates have remained
low and customer renewals have been problematic. This is the direct
result of a business model that does not include the proper planning
and coaching required to ensure customer utilization. Regardless of the
deployment model (in-house or hosted), there is still a reasonable
degree of planning and mentoring necessary for the successful
implementation and utilization of CRM.
According to Larry Caretsky, president of Commence CRM, “Few have
addressed this requirement with extraordinarily effectiveness, however
through the use of a proprietary implementation methodology called STEP
(Selling Tools Enablement Program), this measurement of customer
loyalty and buying patters can be effectively quantified.”
STEP outlines the planning and responsibilities required by the
customer and ensures a successful implementation and use of a SaaS
(software as a solution) CRM solution. This critical training
functionality has been missing in the industry and has become a
significant differentiator for industrial businesses.
Many of SMB companies, while small, have simply outgrown their contact
managers and are looking for tools to help them improve sales execution
and customer service effectiveness. In order to achieve these
improvements, SMB companies require an integrated CRM system that
supports sales, marketing, and customer support, while providing better
collaboration and disparate system integration. In the past, this level
of functionality was too expensive for small to mid-size companies and
required IT support. Hosted solutions make this level of functionality
affordable, easy to use, and simple to deploy. Additionally,
conversion tools that make the transition of contact management
databases such as ACT and Goldmine can be virtually seamless.
The problem is that manufacturers often look at CRM as a commodity and
it really is not. Having interviewed many customers that purchased
their CRM solution based on brand recognition, they have been extremely
disappointed with the end result. There is more value in the domain
experience a CRM technology vendor can provide to the customer than in
the product itself. The big guys in CRM solutions are severely lacking
in industry sector domain experience because their business model does
not provide them with the ability to engage the customer directly.
Instead the CRM Goliaths rely on third party companies which rarely
have the industry knowledge or experience to ensure the successful
implementation and use of these products. This has resulted in higher
cost implementations and a low level of customer satisfaction among
many SMB organizations.
To ignore where loyalty is truly directed puts a company at risk; to
ignore the CRM industry sector requirements and unique specifications
also puts a company at risk.
Thomas R. Cutler is the President & CEO of Fort Lauderdale,
Florida-based TR Cutler, Inc., the largest manufacturing marketing firm
worldwide. Cutler is the founder of the
Manufacturing Media Consortium of three thousand journalists and
editors writing about trends in manufacturing. Cutler is also the
author of the Manufacturers’ Public Relations and Media Guide.
trcutlerinc.com
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